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QSR Chicken: Driving the Industry's Growth

RJ Hottovy
Oct 27, 2023
QSR Chicken: Driving the Industry's Growth

The quick-service restaurant category was built by burger concepts like McDonald’s, but it’s not exactly a secret that chicken concepts have established themselves as the new pacesetters in recent years. Led by aggressive expansion plans from Chick-fil-A and Raising Cane’s, Popeyes Louisiana Kitchen kicking off the Chicken Sandwich Wars of 2019, and new innovations from concepts like Dave’s Hot Chicken, the category has been essential to the recent growth of the QSR category. Over the past few weeks, we’ve had the opportunity to interact with leadership for several brands in this category and discuss their outlook for the future. Based on those discussions, we thought we’d take a look at the current state of the QSR chicken category and where the category may be heading.

As a starting point, we thought we’d look at visit per venue trends across QSR subcategories to accentuate how disruptive this category has been to the broader QSR industry. One caveat–because it is the largest player in the QSR category and its restaurants tend to have larger footprints than other QSR concepts, we’ve separated McDonald’s from this analysis. We’ve written about McDonald’s and what is driving their recent success in the past–including innovative promotions and an engaging loyalty program–but many of the factors driving success in the QSR chicken category have also been adopted by McDonald's.

As shown below, visits per location between the chicken and burger QSR subcategories were relatively close in 2017, but chicken started to outpace burgers in 2018 (largely the byproduct of Chick-fil-A’s expansion efforts) and then widened the gap due to the release of Popeye’s chicken sandwich in 2019 (which prompted successful launches of new chicken sandwiches at KFC and Chick-fil-A. The pandemic negatively impacted visitation trends for most QSR concepts, although less impacted than other restaurant categories due to mobile ordering and drive-thru innovations. The overall QSR industry has improved since the depths of the pandemic, with visits per location running ahead of pre-pandemic levels for much of 2023. However, the chicken subcategory has been a standout, and has widened its gap to other subcategories. In fact, the chicken category has seen an 11% increase in visits per location over the past four years (Q3 2023 versus Q3 2019).

What explains chicken’s outperformance in the QSR industry? Why do concepts like Chick-Fil-A (which had average unit volumes of $6.7M last year according to QSR Magazine) and Raising Cane’s (average unit volume of $5.4M) outperform the rest of the category by such a wide margin? It comes down to multiple factors. We’ve covered these chains’ ability to facilitate more visitors than the rest of the QSR category in the past, and this added capacity certainly is a big part in the outperformance. However, the ability to facilitate more visitors than other chains is a byproduct of many other factors, including menu simplicity (which improves speed of service), intense focus on labor staffing and training, as well as local advertising/engagement efforts (at a event this week, Raising Cane’s CFO Mike Andrew told us that half of the company’s marketing budget is allocated to local marketing efforts, which can help to build a greater connection with customer). Technology–a topic we’ve spent some time on recently–also plays a part, as handheld order taking systems have been critical in being able to facilitate a greater number of drive-thru transactions (which make up close to 70% of transactions in this category according to our estimates).  

By and large, these chains have been successful as they expand to new markets and driven relatively consistent AUVs. Below, we've highlighted the trailing-twelve-month visits per location for eight of the largest QSR chicken chains compared to the limited-service restaurant (QSR and fast casual) average.

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RJ Hottovy

Head of Analytical Research, Placer.ai

R.J. Hottovy, CFA has covered the restaurant, retail, and e-commerce sectors for 20 years as an equity analyst and strategist for Morningstar, William Blair & Co., and Deutsche Bank. R.J. also brings a wealth of experience with early-stage investments as a committee member for the IrishAngels / Vitalize venture capital group. Over the past three years, he advised over 50 food service companies on more than $200 million in early-stage capital raises and M&A transactions.

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